Foreclosure Tax Question for California?

How does Foreclosure affect our financial liability and taxes if we had to walk away from our house in California? Our loan was interest only and our FIRST was in the amount of $ 351,000 and our SECOND was for $ 65,000. I just found out our foreclosed home solde for $ 371,000. We just received a 1099-A form stating that the outstanding balance was $ 351,000 and the Fair Market Value of $ 371,000. Can you break this down for me?

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